Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 1 of 54
`
`
`
`
`
`
`
`
`
`
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`
`FEDERAL TRADE COMMISSION,
`
`Plaintiff,
`
`v.
`
`FACEBOOK, INC.,
`
`Defendant.
`
`
`
`
`
`
`Case No. 1:20-cv-03590-JEB
`
`
`
`
`
`
`MEMORANDUM IN SUPPORT OF
`FACEBOOK, INC.’S MOTION TO DISMISS FTC’S COMPLAINT
`
`
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 2 of 54
`
`TABLE OF CONTENTS
`
`Page
`
`TABLE OF AUTHORITIES ......................................................................................................... iii
`
`INTRODUCTION ...........................................................................................................................1
`
`BACKGROUND .............................................................................................................................6
`
`A.
`
`B.
`
`C.
`
`D.
`
`Facebook’s Innovative Free Products Deliver Value To Millions
`Of U.S. Consumers ..................................................................................................6
`
`Facebook’s 2012 Instagram Acquisition .................................................................7
`
`Facebook’s 2014 WhatsApp Acquisition ................................................................8
`
`Facebook’s Former Platform Policies ......................................................................8
`
`LEGAL STANDARD ......................................................................................................................9
`
`ARGUMENT .................................................................................................................................10
`
`I.
`
`THE SECTION 2 CLAIM FAILS BECAUSE THE FTC HAS NOT
`PLEADED FACTS ESTABLISHING A PLAUSIBLE RELEVANT
`ANTITRUST MARKET ...................................................................................................10
`
`A.
`
`B.
`
`The FTC’s Alleged Market Definition Is Inadequate For Lack Of
`Facts Showing Cross-Elasticity Of Demand..........................................................11
`
`The FTC’s Attempt To Define A Market By Reasonable
`Interchangeability Is Insufficiently Pleaded And Implausible ...............................12
`
`II.
`
`THE FTC DOES NOT ALLEGE FACTS ESTABLISHING
`MONOPOLY POWER ......................................................................................................20
`
`A.
`
`B.
`
`The FTC Does Not Allege Direct Proof Of Monopoly Power ..............................20
`
`The FTC Does Not Allege Facts Sufficient To Plausibly Establish
`Indirect Proof Of Monopoly Power .......................................................................21
`
`III.
`
`THE FTC DOES NOT ALLEGE ACTIONABLE EXCLUSIONARY
`CONDUCT ........................................................................................................................23
`
`A.
`
`The Instagram And WhatsApp Acquisitions Were Not Unlawful
`Exclusionary Conduct ............................................................................................26
`
`1.
`
`The FTC Cannot Belatedly Challenge Mergers Cleared
`After HSR Review As Unlawful Exclusionary Conduct
`Absent Allegations That Agency Review Was
`Compromised .............................................................................................26
`
`i
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 3 of 54
`
`2.
`
`The FTC Fails To Allege Facts Establishing A Plausible
`Claim That Facebook’s Acquisitions Were Unlawful
`Exclusionary Conduct ................................................................................30
`
`a)
`
`b)
`
`The FTC alleges no facts establishing a plausible
`claim that the Instagram acquisition harmed
`competition and consumers ............................................................30
`
`The FTC fails to allege that Facebook’s acquisition
`of non-competitor WhatsApp was exclusionary ............................34
`
`B.
`
`The FTC’s Claim That Facebook’s 2011-2018 Policies Harmed
`Competition By Preventing Competitors From Making
`Unrestricted Use Of Its Proprietary Platform Fails As A Matter Of
`Law ........................................................................................................................36
`
`IV.
`
`THE FTC LACKS AUTHORITY TO MAINTAIN THIS SUIT ......................................39
`
`A.
`
`B.
`
`Congress Authorized The FTC To Sue In Federal Court Only To
`Halt Imminent Or Ongoing Violations Of Law .....................................................40
`
`The FTC Alleges Only Past Conduct Not Cognizable Under
`Section 13(b) ..........................................................................................................42
`
`CONCLUSION ..............................................................................................................................44
`
`
`
`ii
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 4 of 54
`
`CASES
`
`TABLE OF AUTHORITIES*
`
`Page
`
`Adidas Am., Inc. v. NCAA, 64 F. Supp. 2d 1097 (D. Kan. 1999) ............................................11, 19
`
`Agnew v. NCAA, 683 F.3d 328 (7th Cir. 2012) ..............................................................................15
`
`Am. Sales Co. v. AstraZeneca AB, 2011 WL 1465786 (S.D.N.Y. Apr. 14, 2011) ........................16
`
`Ashcroft v. Iqbal, 556 U.S. 662 (2009) ........................................................................................6, 9
`
`Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (1985) ....................................37
`
`Ball Mem’l Hosp., Inc. v. Mut. Hosp. Ins., Inc., 784 F.2d 1325 (7th Cir. 1986) .....................20, 23
`
`Bay Area Surgical Mgmt. LLC v. Aetna Life Ins. Co., 166 F. Supp. 3d 988
`(N.D. Cal. 2015).................................................................................................................16
`
`Bayer Schering Pharma AG v. Sandoz, Inc., 813 F. Supp. 2d 569 (S.D.N.Y. 2011) ....................14
`
`* Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ..............................................9, 12, 21, 25, 31, 43
`
`Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297 (3d Cir. 2007) ................................................33
`
`Brooke Grp. Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993) ..........................33
`
`Brown Shoe Co. v. United States, 370 U.S. 294 (1962) ................................................................28
`
`Chawla v. Shell Oil Co., 75 F. Supp. 2d 626 (S.D. Tex. 1999) .....................................................11
`
`Complete Entm’t Res. LLC v. Live Nation Entm’t, Inc., 2016 WL 3457177
`(C.D. Cal. May 11, 2016) ..................................................................................................43
`
`Compliance Mktg., Inc. v. Drugtest, Inc., 2010 WL 1416823
`(D. Colo. Apr. 7, 2010) ......................................................................................................18
`
`Concord Assocs., L.P. v. Entm’t Props. Tr.:
`
`
`
`
`
`2014 WL 1396524 (S.D.N.Y. Apr. 9, 2014), aff’d, 817 F.3d 46
`(2d Cir. 2016) .....................................................................................................................10
`
`817 F.3d 46 (2d Cir. 2016).................................................................................................18
`
`Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039 (8th Cir. 2000) .....................................43
`
`
`* Authorities principally relied upon are marked with an asterisk.
`
`iii
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 5 of 54
`
`Consultants & Designers, Inc. v. Butler Serv. Grp., Inc., 720 F.2d 1553
`(11th Cir. 1983) ..................................................................................................................38
`
`CREW v. Pompeo, 2020 WL 5748105 (D.D.C. Sept. 25, 2020) .....................................................9
`
`Cupp v. Alberto-Culver USA, Inc., 310 F. Supp. 2d 963 (W.D. Tenn. 2004) .........................14, 19
`
`Democracy Forward Found. v. White House Office of Am. Innovation,
`356 F. Supp. 3d 61 (D.D.C. 2019) .....................................................................................39
`
`Dresses for Less, Inc. v. CIT Grp./Commercial Servs., Inc., 2002 WL 31164482
`(S.D.N.Y. Sept. 30, 2002) ............................................................................................31, 32
`
`Eastman v. Quest Diagnostics Inc., 2016 WL 1640465 (N.D. Cal. Apr. 26,
`2016), aff’d, 724 F. App’x 556 (9th Cir. 2018) ...........................................................28, 31
`
`Facebook, Inc. v. Power Ventures, Inc., 2010 WL 3291750 (N.D. Cal. July 20,
`2010) ..................................................................................................................................38
`
`Fraser v. Major League Soccer, L.L.C., 284 F.3d 47 (1st Cir. 2002) ...........................................34
`
`FTC v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020)..........................................................................40
`
`FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004) ........................................................11
`
`FTC v. Credit Bureau Ctr., LLC, 937 F.3d 764 (7th Cir. 2019) ....................................................40
`
`FTC v. Dean Foods Co., 384 U.S. 597 (1966) ........................................................................27, 41
`
`FTC v. Elders Grain, Inc., 868 F.2d 901 (7th Cir. 1989) ..............................................................30
`
`FTC v. Evans Prods. Co., 775 F.2d 1084 (9th Cir. 1985) .............................................................40
`
`FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020) ...................................................................40
`
`FTC v. RAG-Stiftung, 436 F. Supp. 3d 278 (D.D.C. 2020) ...........................................................11
`
`* FTC v. Shire ViroPharma, Inc., 917 F.3d 147 (3d Cir. 2019) ...........................................41, 42, 43
`
`FTC v. Steris Corp., 133 F. Supp. 3d 962 (N.D. Ohio 2015) ........................................................35
`
`FTC v. Tronox Ltd., 332 F. Supp. 3d 187 (D.D.C. 2018) ..............................................................41
`
`Geneva Pharm. Tech. Corp. v. Barr Labs. Inc., 386 F.3d 485 (2d Cir. 2004) ..............................13
`
`Gross v. Wright, 185 F. Supp. 3d 39 (D.D.C. 2016) .....................................................................10
`
`Herron v. Fannie Mae, 2012 WL 13042852 (D.D.C. Mar. 28, 2012).............................................7
`
`* Hicks v. PGA Tour, Inc., 897 F.3d 1109 (9th Cir. 2018) ...................................................10, 11, 13
`
`iv
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 6 of 54
`
`hiQ Labs, Inc. v. LinkedIn Corp., --- F.3d ---, 2020 WL 5408210
`(N.D. Cal. Sept. 9, 2020) ...................................................................................................37
`
`It’s My Party, Inc. v. Live Nation, Inc., 811 F.3d 676 (4th Cir. 2016) ......................................2, 19
`
`Jacobs v. Tempur-Pedic Int’l, Inc., 626 F.3d 1327 (11th Cir. 2010) .......................................12, 13
`
`Lorain Journal Co. v. United States, 342 U.S. 143 (1951)......................................................38, 39
`
`Madison 92nd St. Assocs., LLC v. Courtyard Mgmt. Corp., 624 F. App’x 23
`(2d Cir. 2015) ............................................................................................................... 12-13
`
`MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124 (9th Cir. 2004) ........................................37
`
`Midwestern Mach. Co. v. Nw. Airlines, Inc., 392 F.3d 265 (8th Cir. 2004) ..................................42
`
`Morris Commc’ns Corp. v. PGA Tour, Inc., 364 F.3d 1288 (11th Cir. 2004)...............................38
`
`Mylan Pharm. Inc. v. Warner Chilcott Pub. Ltd. Co., 838 F.3d 421 (3d Cir. 2016) .....................21
`
`Nat’l ATM Council, Inc. v. Visa Inc., 922 F. Supp. 2d 73 (D.D.C. 2013) .....................................33
`
`NCAA v. Bd. of Regents, 468 U.S. 85 (1984)...................................................................................5
`
`* Novell, Inc. v. Microsoft Corp., 731 F.3d 1064 (10th Cir. 2013) ......................................26, 32, 37
`
`NSS Labs, Inc. v. Symantec Corp., 2019 WL 3804679 (N.D. Cal. Aug. 13, 2019) .......................12
`
`Ohio v. Am. Express Co., 138 S. Ct. 2274 (2018) ...................................................................10, 13
`
`* Pac. Bell Tel. Co. v. linkLine Commc’ns, Inc., 555 U.S. 438 (2009) ..................................4, 25, 36
`
`Packaging Sys., Inc. v. PRC-Desoto Int’l, Inc., 268 F. Supp. 3d 1071
`(C.D. Cal. 2017) .................................................................................................................15
`
`Pharm. Research & Mfrs. of Am. v. FTC, 790 F.3d 198 (D.C. Cir. 2015) ....................................27
`
`Pharm. Research & Mfrs. of Am. v. U.S. Dep’t of Health & Human Servs.,
`43 F. Supp. 3d 28 (D.D.C. 2014) .........................................................................................7
`
`* Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (3d Cir. 1997) ..............................11
`
`* Rambus Inc. v. FTC, 522 F.3d 456 (D.C. Cir. 2008) .................................................................4, 24
`
`Rebel Oil Co. v. Atl. Richfield Co., 51 F.3d 1421 (9th Cir. 1995) ...........................................20, 22
`
`Reiter v. Sonotone Corp., 442 U.S. 330 (1979) ...............................................................................5
`
`v
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 7 of 54
`
`* Reveal Chat Holdco, LLC v. Facebook, Inc., 471 F. Supp. 3d 981
`(N.D. Cal. 2020).................................................................................................4, 38, 39, 42
`
`Rothery Storage & Van Co. v. Atlas Van Lines, Inc., 792 F.2d 210
`(D.C. Cir. 1986) .................................................................................................................28
`
`Roy B. Taylor Sales, Inc. v. Hollymatic Corp., 28 F.3d 1379 (5th Cir. 1994) ...............................25
`
`Saint Alphonsus Med. Ctr.-Nampa Inc. v. St. Luke’s Health Sys., Ltd.,
`778 F.3d 775 (9th Cir. 2015) .............................................................................................31
`
`Sambreel Holdings LLC v. Facebook, Inc., 906 F. Supp. 2d 1070 (S.D. Cal. 2012) ..........4, 38, 39
`
`Sky Angel, LLC v. Nat’l Cable Satellite Corp., 947 F. Supp. 2d 88 (D.D.C. 2013) ................11, 14
`
`Smith & Johnson, Inc. v. Hedaya Home Fashions Inc., 1996 WL 737194
`(S.D.N.Y. Dec. 26, 1996), aff’d, 125 F.3d 844 (2d Cir. 1997)..........................................11
`
`Texaco Inc. v. Dagher, 547 U.S. 1 (2006) .....................................................................................28
`
`Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield,
`552 F.3d 430 (6th Cir. 2008) .............................................................................................15
`
`Trudeau v. FTC, 456 F.3d 178 (D.C. Cir. 2006) .............................................................................9
`
`U.S. Ring Binder L.P. v. World Wide Stationery Mfg. Co., 804 F. Supp. 2d 588
`(N.D. Ohio 2011) ...............................................................................................................20
`
`United States v. Aetna Inc., 240 F. Supp. 3d 1 (D.D.C. 2017) ......................................................34
`
`United States v. Am. Can Co., 230 F. 859 (D. Md. 1916) .............................................................32
`
`United States v. Am. Tobacco Co., 221 U.S. 106 (1911) ...............................................................32
`
`* United States v. Baker Hughes Inc., 908 F.2d 981 (D.C. Cir. 1990) .............................................27
`
`United States v. Grinnell Corp., 384 U.S. 563 (1966) .............................................................20, 23
`
`United States v. Marine Bancorporation, Inc., 418 U.S. 602 (1974) ............................................34
`
`* United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) .................................20, 24, 25, 38
`
`United States v. Paramount Pictures, Inc., 2020 WL 4573069
`(S.D.N.Y. Aug. 7, 2020) ....................................................................................................26
`
`United States v. Syufy Enters., 903 F.2d 659 (9th Cir. 1990) ........................................................29
`
`* Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, LLP,
`540 U.S. 398 (2004) .........................................................................4, 23, 24, 26, 29, 30, 36
`
`vi
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 8 of 54
`
`Yamaha Motor Co. v. FTC, 657 F.2d 971 (8th Cir. 1981) ............................................................35
`
`Z Techs. Corp. v. Lubrizol Corp., 753 F.3d 594 (6th Cir. 2014) ...................................................43
`
`
`
`ADMINISTRATIVE DECISIONS
`
`Op. of the Comm’n, In re Chicago Bridge & Iron Co., Dkt. No. 9300
`(FTC Jan. 6, 2005) .............................................................................................................28
`
`
`
`STATUTES AND RULES
`
`All Writs Act, 28 U.S.C. § 1651 ....................................................................................................41
`
`Clayton Act, 15 U.S.C. § 12 et seq. ..............................................................................................27
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`§ 7, 15 U.S.C. § 18 .....................................................................................27, 28, 34, 35, 36
`
`§ 7A, 15 U.S.C. § 18a ........................................................................................................26
`
`§ 7A(a)(2)(A), 15 U.S.C. § 18a(a)(2)(A) .........................................................................7, 8
`
`§ 7A(a)-(e), 15 U.S.C. § 18a(a)-(e) ......................................................................................8
`
`§ 7A(e), 15 U.S.C. § 18a(e) .................................................................................................8
`
`§ 7A(d)(1), 15 U.S.C. § 18a(d)(1) .................................................................................3, 27
`
`§ 7A(i)(1), 15 U.S.C. § 18a(i)(1) .......................................................................................30
`
`Federal Trade Commission Act, 15 U.S.C. § 41 et seq. ...........................................................4, 39
`
`
`
`
`
`§ 5(b), 15 U.S.C. § 45(b) ...................................................................................................39
`
`§ 13(b), 15 U.S.C. § 53(b) .................................................................4, 5, 39, 40, 41, 42, 44
`
`Hart-Scott-Rodino Antitrust Improvements Act of 1976,
`Pub. L. No. 94-435, 90 Stat. 1383 .................................................3, 7, 8, 24, 26, 27, 28, 30
`
`Sherman Act, 15 U.S.C. § 1 et seq. ...........................................................................1, 4, 27, 28, 29
`
`
`
`§ 2, 15 U.S.C. § 2 ..............................................................................1, 4, 10, 20, 24, 26, 29,
`
`Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 ..........................................36
`
`Fed. R. Civ. P. 12(b)(6)................................................................................................................1, 4
`
`30, 31, 32, 33, 34, 36, 42, 44
`
`vii
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 9 of 54
`
`LEGISLATIVE MATERIALS
`
`119 Cong. Rec. 36,610 (1973) .......................................................................................................42
`
`S. Rep. No. 93-151 (1973) .............................................................................................................42
`
`
`
`ADMINISTRATIVE MATERIALS
`
`Compl., In re Automatic Data Processing, Inc., Dkt. No. 9282 (FTC Nov. 14,
`1996) ..................................................................................................................................28
`
`Fed. Trade Comm’n:
`
`
`
`
`
`FTC Closes Its Investigation Into Facebook’s Proposed Acquisition of
`Instagram Photo Sharing Program (Aug. 22, 2012),
`https://www.ftc.gov/news-events/press-releases/2012/08/ftc-closes-its-
`investigation-facebooks-proposed-acquisition ..............................................................8, 30
`
`Model Request for Additional Information and Documentary Material
`(rev. June 2010), https://www.ftc.gov/sites/default/files/attachments/
`premerger-introductory-guides/guide3.pdf ..........................................................................8
`
`Premerger Notification; Reporting and Waiting Period Requirements,
`60 Fed. Reg. 38,930 (July 28, 1995) ..................................................................................27
`
`Premerger Notification: Reporting and Waiting Period Requirements,
`64 Fed. Reg. 34,804 (June 29, 1999) .................................................................................27
`
`U.S. Dep’t of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines
`(2010) ...........................................................................................................................21, 31
`
`
`
`OTHER MATERIALS
`
`Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law:
`
`
`
`(1998) .................................................................................................................................31
`
`(4th ed. 2020) ...............................................................................................................27, 32
`
`Brief of the FTC, FTC v. Shire ViroPharma Inc., 917 F.3d 147 (3d Cir. June 19,
`2018) (No. 18-1807), 2018 WL 3101438 ..........................................................................41
`
`Compl., FTC v. Hearst Tr., No. 01-cv-00734 (D.D.C. Apr. 5, 2001) ...........................................28
`
`viii
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 10 of 54
`
`David L. Meyer, Section 2 Standards and Consumer Welfare: Some Lessons from
`the World of Merger Enforcement, 2007 Colum. Bus. L. Rev. 371 ..................................29
`
`Richard A. Posner, Antitrust Policy and the Supreme Court: An Analysis of the
`Restricted Distribution Horizontal Merger and Potential Competition
`Decisions, 75 Colum. L. Rev. 282 (1975) .........................................................................34
`
`
`
`ix
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 11 of 54
`
`INTRODUCTION
`
`No government lawsuit similar to this one has been brought in the 130-year history of the
`
`Sherman Act, and for good reason: The Federal Trade Commission (“FTC”) has not alleged
`
`facts amounting to a plausible antitrust case. By a one-vote margin, in the fraught environment
`
`of relentless criticism of Facebook for matters entirely unrelated to antitrust concerns, the agency
`
`decided to bring a case against Facebook that ignores its own prior decisions, controlling
`
`precedent, and the limits of its statutory authority. It should be dismissed for failure to state a
`
`claim under Federal Rule of Civil Procedure 12(b)(6).
`
`The FTC’s one-count monopolization case against Facebook utterly ignores the reality of
`
`the dynamic, intensely competitive high-tech industry in which Facebook operates. To state a
`
`claim under Section 2 of the Sherman Act, the FTC must allege facts that, accepted as true,
`
`plausibly establish: (1) a relevant antitrust market that includes all products that are acceptable
`
`substitutes for Facebook; (2) that Facebook has monopoly power in that market, that is, the
`
`power to harm competition and consumers, typically by raising prices or restricting output; and
`
`(3) that Facebook has maintained monopoly power through anticompetitive actions that harmed
`
`competition and consumers. The complaint fails because the FTC has not pleaded facts
`
`sufficient to satisfy any of the three required elements of a claim under Section 2. In addition,
`
`the agency has no authority to bring a lawsuit in federal district court predicated on Facebook’s
`
`long-past actions.
`
`The FTC Has Not Alleged A Plausible Relevant Market. It is the FTC’s burden to
`
`allege facts establishing a market that includes all products that consumers consider acceptable
`
`substitutes. Virtually ignoring the relentlessly competitive business that provides Facebook with
`
`substantially all of its revenues (advertising), the FTC purports instead to define a free “personal
`
`social networking” user market with only the vaguest of limits. Compl. ¶¶ 52-55, ECF No. 51.
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 12 of 54
`
`No court has ever held that such a free goods market exists for antitrust purposes, and the FTC
`
`does not allege that one exists here. The FTC does not allege any facts that would permit the
`
`Court to discern which products (or even which features of Facebook) are in the alleged market
`
`and which are not. It does not and cannot define the market using the standard analysis of cross-
`
`elasticity of demand, i.e., the effect a change in price for one product would have on demand for
`
`another. Nor does it offer any plausible alternative to that rigorous analysis, much less one that
`
`could reliably define such a market for the first time in an antitrust case. The FTC’s novel
`
`market definition is even contradicted by its own allegations: the “personal social networking”
`
`description seemingly excludes apps with “some social functionality” and mobile messaging
`
`apps that the FTC says were feared competitors that caused Facebook to restrict access to its
`
`proprietary Platform. Id. ¶¶ 154-156. Ultimately, the FTC’s efforts to structure a crabbed “use”
`
`market for a free service in which it can claim a large Facebook “share” are artificial and
`
`incoherent. “No party” – not even the government – “can expect to gerrymander its way to an
`
`antitrust victory without due regard for market realities.” It’s My Party, Inc. v. Live Nation, Inc.,
`
`811 F.3d 676, 683 (4th Cir. 2016). See infra Part I.
`
`The FTC Has Not Plausibly Alleged Monopoly Power. The FTC also fails to plausibly
`
`allege that Facebook has monopoly power. The FTC cannot establish that Facebook has
`
`increased prices or restricted output because the agency acknowledges that Facebook’s products
`
`are offered for free and in unlimited quantities. See Compl. ¶ 42. While the FTC makes the
`
`bare, conclusory allegation that Facebook has a market share “in excess of 60%,” id. ¶ 64, that
`
`allegation must be disregarded because it is not supported by any facts. The FTC does not
`
`explain how it made this calculation or even which metrics were used or could be used to make
`
`such a calculation of relative free “use” by consumers. And its own factual allegations of easy
`
`2
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 13 of 54
`
`entry by firms outside the “personal social networking” market undermine its conclusory claims
`
`that “entry barriers” prevent such other firms from competing. See id. ¶¶ 81, 88, 96, 108-109,
`
`122. See infra Part II.
`
`The FTC Has Not Plausibly Alleged Unlawful Exclusionary Conduct. The FTC asserts
`
`that Facebook took three “anticompetitive” actions to maintain the monopoly it allegedly (and
`
`lawfully) acquired by 2011. See Compl. ¶ 71. First, Facebook acquired a small photo-sharing
`
`service in 2012, Instagram, see id., after that acquisition was reviewed and cleared by the FTC in
`
`a unanimous 5-0 vote. Second, Facebook acquired a messaging-only service in 2014,
`
`WhatsApp, after that acquisition was reviewed and summarily allowed to proceed by the FTC
`
`given the evident absence of any effect on competition in the United States. See id. Third,
`
`Facebook instituted policies after 2011 that limited competitors’ ability to free-ride on
`
`Facebook’s proprietary Platform. See id. ¶¶ 152-158.
`
`The FTC does not plausibly allege that Facebook’s acquisitions of Instagram and
`
`WhatsApp were anticompetitive. The FTC reviewed both acquisitions before consummation –
`
`as it was obligated to do pursuant to the expansive merger-review regime established by the
`
`Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR”). Under HSR review, the
`
`agency’s job was to “determine” whether those acquisitions would, “if consummated, violate the
`
`antitrust laws.” 15 U.S.C. § 18a(d)(1). It made that required determination and allowed both
`
`mergers to close. The agency offers no basis for disregarding its own contemporaneous
`
`conclusions that the acquisitions would not violate the antitrust laws; remarkably, it does not
`
`even mention them. The agency has not alleged that it was misled or otherwise lacked access to
`
`the relevant information. It just ignores its own decisions, failing to offer any valid explanation
`
`for its about-face – making implausible any claim of reasonably likely harm in 2012 and 2014.
`
`3
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 14 of 54
`
`See infra Part III.A.1. Nor has the FTC provided facts sufficient to support its theory that
`
`Facebook’s acquisitions of marginal or potential competitors amounted to exclusionary conduct
`
`under Section 2 of the Sherman Act, even if the FTC’s theory were valid as a matter of law
`
`(a proposition never accepted by any court). See infra Part III.A.2.
`
`The FTC’s claim that Facebook was required to share its facilities with rivals is precluded
`
`by controlling Supreme Court precedent. Facebook had no antitrust duty to allow anyone to use
`
`its proprietary Platform, and it cannot incur antitrust liability for refusing access to firms that
`
`sought to use its technology to take users away from Facebook. See Pac. Bell Tel. Co. v.
`
`linkLine Commc’ns, Inc., 555 U.S. 438, 450-51 (2009); Verizon Commc’ns Inc. v. Law Offices of
`
`Curtis V. Trinko, LLP, 540 U.S. 398, 407-08 (2004); Reveal Chat Holdco, LLC v. Facebook,
`
`Inc., 471 F. Supp. 3d 981, 1002 (N.D. Cal. 2020) (dismissing similar Platform-based claim of
`
`refusal to deal with rivals under Rule 12(b)(6)); Sambreel Holdings LLC v. Facebook, Inc., 906
`
`F. Supp. 2d 1070, 1075 (S.D. Cal. 2012) (same). See infra Part III.B.
`
`Moreover, none of the challenged conduct is plausibly alleged to have harmed
`
`competition and consumers in any measurable way. See Rambus Inc. v. FTC, 522 F.3d 456, 463
`
`(D.C. Cir. 2008) (exclusionary conduct is conduct that harms competition and consumers).
`
`Prices were not raised (or charged at all), and output was not reduced. None of the harms
`
`typically alleged in antitrust actions is alleged here. The FTC’s allegation that consumers might
`
`have had even better products in a “but-for world” is conclusory, speculative, and entirely
`
`insufficient to meet its pleading obligations.
`
`The FTC Lacks Statutory Authority To Maintain This Suit. Section 13(b) of the
`
`Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 53(b), is the sole source of the FTC’s
`
`claimed authority here. It authorizes the FTC to proceed in federal district court only to stop
`
`4
`
`

`

`Case 1:20-cv-03590-JEB Document 56-1 Filed 03/10/21 Page 15 of 54
`
`ongoing or imminent violations of law. It does not authorize actions to remedy past conduct.
`
`All of the conduct the FTC challenges occurred in 2012 (Instagram acquisition), 2014
`
`(WhatsApp acquisition), and 2011-2018 (Platform policies); indeed, the complaint cites to no
`
`enforcement of the policies after 2013. The FTC’s contention that the continued operation of the
`
`unified Facebook after 2014 is an imminent or ongoing violation of the antitrust laws, because
`
`the FTC decided belatedly to challenge the acquisitions, is contrary to authority: the courts have
`
`rejected claims that completed acquisitions amount to ongoing violations. The FTC’s attempt to
`
`challenge past conduct here is incompatible with the plain text of Section 13(b), flouts the
`
`decisions of many courts, and should be rejected. See infra Part IV.
`
`***
`
`“Congress designed the Sherman Act as a consumer welfare prescription.” NCAA v. Bd.
`
`of Regents, 468 U.S. 85, 107 (1984) (quoting Reiter v. Sonotone Corp., 442 U.S. 330, 343
`
`(1979)) (emphasis added). The FTC itself acknowledges that Facebook, from its founding in
`
`2004, has grown to provide free and unlimited access to its eve